A Perfect Storm in Atlanta? Local Leaders Say Inbound Companies, Property Values, Movie Industry Will Attract Hyperscalers…Sooner or Later
ATLANTA, GA – The first panel at CAPRE’s Fourth Annual Greater Atlanta Data Center & Cloud Infrastructure Summit on August 15 was a lively roundtable discussion titled State of the Greater Atlanta Data Center Market: Analysis of Demand-Supply and Emergence of New Debt and Equity Capital Sources featuring five storied industry leaders offering first-rate analysis about the lay of the land in Atlanta. And inevitably, the topic turned to the impact of the big boys – and how hyperscale might change the game in Atlanta.
“I’m from the Ashburn area. What we are seeing is a shift in the hyperscale side, with Google, Facebook, Amazons going to a different model — a powered shell or a build-they-own,” remarked Moderator Jeff Ivey, Strategic Development a CPG. “Is that shifting in this market as well? If colo is building these big sites for these guys, and maybe they’re not taking it, what’s your reaction to that?”
Jason Chartrand, Executive Vice President at T5 Data Centers offered the first response to the query, and he did so with a question of his own. “Well, is colo building to that scale on-spec?” he asked. “That’s a big gamble, especially with hyperscalers building for themselves. It’s great that they’re coming in and it’s great the they have Atlanta on their radar. But I don’t have an appetite to go and build a 50 MW data center, throw it out there, and then say, Oh, I hope somebody comes and leases it.”
T5 is positioning themselves pragmatically and cautiously, by purchasing land where they are ready for a facility to be built, according to Chartrand. “Even though we’re probably going to build a shell,” he revealed. “But to spend millions of dollars and just hope that we catch one? I don’t see that happening. I think it’d be foolish.”
“Switch has had a different model,” he clarified, referring to an earlier discussion about the relatively new entrant to the Atlanta market. “I think they have a very deep stable of customers in Las Vegas. So simply mining that customer list and trying to shift them to Atlanta, that is a strategy. We’ll see how that plays out. But being just a pure-spec developer in the colo world [regardless of] hyperscale and tenant demand…I don’t think is a very sound strategy.”
At that point, co-panelist Jake Ring, Co-Founder & CEO of GIGA Data Centers offered an important piece of data. “If you’re spending $2 Million USD per acre up and around Northern Virginia, and it’s over $4.2 Million per acre out in Silicon Valley, it’s a lot cheaper here,” he interjected.
“I agree with that. The land banking that we see in Northern Virginia, that’s because they’re buying land, sitting on it, and expecting themselves to grow and build,” concurred Chartrand. “There is such a phenomenon as the Cloud thruster, which we’ve seen up in Northern Virginia and out west. But [Atlanta] just doesn’t have that yet. When we do have it, I think it will benefit everyone in this room and really, the city as a whole. It just hasn’t come yet. We do need the Microsofts and the AWSs here.”
With that, Mike Higgins, Senior Vice President for Business Development at INAP offered an astute comment. “When we play in the hyperscale space – we usually play in the retail space — it’s a good thing when Amazon and Google come to the marketplace,” he mused. “There’s a lot of local edge supporters that we see come out for those type of providers. They do actually look for those retail colo providers who are [going for a] half a megawatt to a megawatt play. We actually have a couple of those customers in our portfolio.”
However, Higgins then pointed out the importance of understanding the exact moment Atlanta finds itself at. “This is big times. Mike Lash’s statistics for the last 12 months, have been mind-boggling for growth,” he stressed. “The hyperscale side needs a little more recognition, but if they find some power, they will come. Look at Facebook’s 37 megawatt campus. They’ll come. There’s plenty of demand.”
“The one thing that Atlanta has that all of the other places don’t have is, is the movies,” added Timothy Kiser, Owner of Kiser Consulting and formerly Owner of Colo Atl, a JT Communications Company. “Most movies are made in Atlanta instead of California and New York. There’s a lot of reasons for that. One is the that there’s a lot of data – that’s another conversation. But we also have the schools. A lot of our municipalities are making it so that they have their own networks. That’s grown. Why are we poised for this? Well, look at what Jake was saying. Our property values are much lower.”
And with that, Jake Ring, closed out the topic by asserting that the capital of the southeast is Atlanta. “Dallas is the capital of the southwest. Chicago is the capital of the Midwest,” he listed. “But we have the benefit that so many companies are moving down here. As we get more of those eyeballs, and those are the things that will drive content.”
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